Private landlords brace themselves for big hike in tax bills

Landlords face paying considerably more tax next year after the Government started to phase in changes to their tax relief.

With the Government now almost two months into rolling out its new buy-to-let tax relief system, online letting agent Upad says its landlords will see an average 13% increase in their taxable profit in the next tax year.

The changes, which started being phased in on April 6 this year, mean that landlords must now pay tax on turnover, rather than the difference between rental income and mortgage interest.

Until last month, landlords could deduct the full cost of their mortgage interest payments, or any other property finance, on their rental properties before they paid tax.

Two months in, mortgage, loan and overdraft interest costs can no longer be considered in calculating taxable rental income.

The changes will be phased in gradually over the next four years, and by 2020, 100% of buy-to-let finance costs will be restricted to the basic tax rate of only 20%.

James Davis, Upad CEO and founder, said: “Despite the changes being gradually introduced over the next four years, our latest research shows how out of pocket landlords are set to be by 2018/19 alone, as they see a big rise in their tax bills and a substantial hit to their profits.

“Those who are in the higher rate tax bracket of 40% will be the worst affected but others could find themselves being tipped into the higher tax bracket despite their income not having increased, which will leave many renting at a loss and subsidising their property every month.”

Upad believes 20% of landlords will increase rents to help mitigate the cost of their new tax bill, meaning tenants could face a permanent increase in rent as a direct result of the changes.

Davis said that landlords also face a hike in charges from letting agents after the letting fee ban comes in.

He said: “Landlords should look at ways to negotiate with their letting agent.”

There are anecdotal reports that landlords are already quitting the sector – and, as we reported on Friday, tenants in an annual survey into reasons why they move are now citing for the first time the sale of their property by their landlord. There is also conjecture that one way that landlords who have previously used agents will cut costs is to self-manage.

Upad’s online budget calculator tool is at:


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  1. Will

    Once landlords have suffered they will probably sell off some of their investments. This will reduce rental supplies and rent increases will naturally follow. They certainly know how to put the CON in Conservative!

  2. Woodentop

    Double standards …you can have  a business loan which is tax deductible but not a landlord. Yet landlords are defined as a business.


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